Summer road trip? Expect fluctuation in the price of gas

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Writing out a summer vacation budget this year? Take some advice from oil analysts: Use a pencil. And keep an eraser nearby. As the summer driving season approaches, oil analysts can't seem to agree just how much a gallon of gas will cost. Analysts agree that gas prices typically peak around Memorial Day, as they did in 2007, when Chicago area prices reached record highs. But this year could be different, according to Chicago-based oil analyst and Fox business news contributor Phil Flynn. “I think (prices) are going to come down. Maybe pretty substantially,” Flynn said. Neal Gamson has a different view. An economist, Gamson works for the Energy Information Administration, which provides energy statistics to the U.S. government. The EIA is predicting that gas prices will increase by 20 to 25 cents across the Midwest by Memorial Day. “We're anticipating these higher prices, not so much because of crude prices but because of the summer driving season,” Gamson said. While they may disagree about future gas prices, most analysts agree recent higher prices at the pump have been caused by economic fears, not by the principle of supply and demand. Demand has actually dropped slightly in Illinois and across the U.S. during the past few months. But prices at the pump have risen anyway, driven by weakness in the value of the U.S. dollar, analysts said. Current economic troubles relating to the subprime loan crisis have led the U.S. Federal Reserve to cut interest rates several times in recent months. Those rate cuts were intended to put more cash back into the economy, but they also devalued the dollar. That's led the world's crude oil suppliers to demand more U.S. dollars for the same amount of oil. And those higher crude prices have led to higher prices at the pump. In Flynn's opinion, the Federal Reserve's most recent cut of a key interest rate by three quarters of a percentage point was a good omen because it was less then the predicted full point cut. “The federal reserve (last week) seemed to get their hands around the financial crisis,” he said. “That should translate to lower gasoline prices going forward.” “The good news is that prices are going to come down. The bad news is they are already at record levels, but we're going to get squeezed a little bit less,” Flynn said. Regardless of the value of the dollar, the long-term causes for the high price of gas remains the same: rising world demand for oil and declining supply of oil fields, analysts said. But even if all factors with the supply, demand and the economy were to remain steady, the price of gas would still rise by about 8 to 16 cents this summer in Chicago area, said David Sykuta, executive director of the Illinois Petroleum Council. That's because every summer, the government requires oil refineries to create a special clean-burning blend of gasoline for the eight-county Chicago area, Sykuta said. The more expensive blend and higher demand from drivers lead to higher prices at the pump, he said. “Generally, prices go up in the summer because of those factors, but this might not be a typical year,” Sykuta said. Sykuta was quick to point out that state, federal and local taxes also increase the cost of gas by more than 70 cents for every gallon sold in McHenry County. “The bad news for Illinois is that prices are always higher here because of taxes,” he said. Some local government representatives would like to change that fact. State Sen. Pamela Althoff, R-McHenry, said she and other Republicans in the state Senate are putting together an economic stimulus package that would include gas-tax relief. The group is suggesting a cap on the amount of sales tax the state takes in from gasoline sales. That would mean drivers wouldn't be charged any extra in sales tax if the price at the pump rose above a certain point, say $2.90 a gallon, Althoff said. Whatever the price at the pump this summer, it's unlikely local travelers will be canceling their vacation plans, said AAA Motor Club Spokeswoman Nicole Niemi. AAA had a record number of travelers in 2007, even as gas prices hit record highs, she said. That doesn't mean vacationers who drive to their destinations aren't taking the price of gasoline into account. “It isn't necessarily that we haven't seen people making adjustments, but we're still seeing people traveling and booking trips,” Niemi said. “The kids might not get the mouse ears or eat at fancy restaurants, but the families will typically go through with those vacations.”